Direct marketing, based on mailings, telemarketing, Internet, or SMS (small messages services) coupled with toll-free numbers, is more often used for products with a low unit cost, and can efficiently replace a sales force with its lower cost. Furthermore, direct marketing relies on more sophisticated database processing techniques. Direct marketing better targets the messages for particular market segments by personalizing the relationship with the consumer.
Dell Computer was the first company to sell PCs by mail only. Today, for large computer and telecommunication manufacturers such as IBM, HP, or Cisco Systems, income generated by direct order represents up to 20% of total sales revenue.
In the United States, on-line ad sales for 2003 were estimated between $6.2 billion and $6.7 billion, rising from an average of $5.7 billion in 2002. Computers and office equipment, publishing and retail, besides human resources, were the sectors that transferred the greatest share of their advertising dollars to the Internet in 2003, according to Double Click and Nielsen/Net Ratings' Ad Relevance. In 2001, in order to improve its leadership position during the technology market slump, IBM spent 15% of its campaign's budget on-line, up from 10% in 1999.
In 2002, Dell spent nearly 7% of its total advertising budget on-line and about 20% of its advertising and marketing budget for consumer products. According to David Toner, Dell's senior e-commerce manager, the cost to acquire a customer through search is a third the cost to acquire a customer through other advertising and the conversion is twice that of any other advertising channel . About 70% of sales made from the Dell portals are driven by search, and not by banners or traditional advertising. In 2002, Dell started using search as a marketing vehicle to attract customers. On the first quarter it sold 2,300 personal computers through search;by the fourth quarter sales had jumped to 26,000 units.
Samsung is another high-tech company that has turned to the use of the Internet to its greatest advantage. In 2002, the company spent 10% of its advertising budget on-line, up from about 1% in 2001. It used more than 50 Web sites to flood consumers 24/7 with brand messages and real-time promotions to make retail traffic. Each ad drove business customers as well as consumers to Samsung's Web site, an 800 number and selected retailers, which are directly connected to its site through an exclusive extranet. Peter Weedfald, Samsung Group's vice president for strategic marketing, estimates that reaching 1,000 people on-line is about 50 times less expensive than doing it on TV .
Among Internet advertising, the so-called "rich-media" advertising has been growing quickly as it became one of the favourite ways for companies to communicate on the Net. "Rich-media" advertising brings in graphical animations, audio and video in the form of floating, cover and full-page ads that interject the Web page requested by a user. According to Jupiter Research, rich-media advertising represented 8% of advertising dollars in 2003, and could reach 22% in 2007.
LookSmart. Research shows up to 98% of traffic comes through the top 5-15 search engines.
SMS Marketing is also getting more and more popular, especially in Europe and Asia where mobile phones are outpacing PCs as the most favourite electronic consumer goods. In Western Europe alone, more than 160 billion SMSs were sent in 2003 by the 60% of 250 million mobile users able to use SMS. All the major consumer brands, including the ones in electronics, are using SMS in their communication mix. Sony Computer used an SMS marketing campaign to push its Playstation2 as a Christmas gift in December 2002 and it worked effectively. All the telecommunication operators, such as Vodafone, Orange, and Telefónica, routinely promote their new marketing offers through SMS. However, Internet and SMS campaigns are becoming less efficient as customers get more and more irritated by unwanted commercial solicitations, or spam, that are flooding their e-mail or m-mail (mobile mail).
In April 2003, Microsoft, AOL, and Yahoo agreed to work together in order to develop new technical e-mail standards to make it more difficult for spam to get through to users. In the United States, spam volume has been doubling every year since 2000 and was estimated to cost businesses $10 billion in 2003, especially to ISPs. In the long run, it could threaten Internet marketing as users would have increasing negative feelings about e-mail.
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